Transcript

Norman Swan: This Saturday is the third anniversary of the passing of what's called the Affordable Care Act in the United States, what detractors call Obamacare. Its passage was hugely controversial and since then has survived a Supreme Court challenge and the presidential election.

But what is this enormous set of reforms and do they have any relevance for the Australian health care system?

Professor John McDonough runs the Center for Public Health Leadership in the Department of Health Policy and Management at Harvard School of Public Health in Boston.

John McDonough: We've survived some very perilous episodes, but the major parts of the law which involve expanding coverage to most of the Americans who don't have health insurance coverage, setting our medical care delivery system on a path to better quality and better cost effectiveness and better coordination of care, creating a system that is more prevention focused than just caring for people after they get sick, all of those and many, many more reforms are moving forward at a very rapid pace.

Norman Swan: And were they all bundled into that one Act?

John McDonough: They were all bundled. So the Affordable Care Act, ACA, is the first major law ever in the history of the United States that has the ambition of achieving comprehensive health reform.

Norman Swan: So take us through each one of these elements and tell us what's happening. So, universal coverage.

John McDonough: So for coverage we are moving forward to January 1, 2014, when most Americans who don't have health insurance will be able on that day to apply and get enrolled in coverage, either through our lower income program that is known as Medicaid or through private health insurance.

It's up to the states to choose whether or not they will accept the public expansion known as Medicaid. If states refuse to go on to the higher income expansion which requires states to set up their own marketplaces or exchanges, if the states refuse to do it then the federal government will come in and do that job for them.

Where state governments are under the control of Democratic governors and legislators it is moving ahead rapidly. Some Republican governors and legislators are saying yes, this makes sense, others are holding back.

Norman Swan: And how do these exchanges work?

John McDonough: Well, we have one in Massachusetts since the reform law that Mitt Romney helped to pass when he was governor, since 2006. So if you just Google Massachusetts Health Connector you can take a ride on an exchange or a marketplace. It's a website that enables you to do simple straightforward apple to apple comparisons among different health insurance products, which for most people in most parts of the country is impossible. You can do it today in Massachusetts, and that was really part of the Massachusetts model that got transformed into the ACA.

Norman Swan: And health insurers are not allowed to deny you coverage?

John McDonough: That is a major change that will begin next January. For the first time in the history of health insurance in the United States an insurance company will not be able to refuse to write you a policy because you have diabetes, because you had a cancer episode, because you had a mental illness problem. Or if they write you coverage, they can't charge you more. Let me just say parenthetically that I am a great admirer of the Australian system. I would take it in a heartbeat over what we have because it is much more of a unitary system, whereas what we have in the United States represents the Serbo-Croatian empire. You have just so many different subsets. So when you say how does this affect consumers, you have to say which of 53 categories do you happen to fit in.

Norman Swan: Wasn't one of the features of the Supreme Court case about compulsion?

John McDonough: Yes, so built into the law is something called the individual mandate. It's if you are determined to be able to afford to purchase health insurance and you don't do so, then you will pay a penalty on your taxes. And again, that was taken from the Massachusetts health reform example.

Norman Swan: And that is a form of community rating, that ensures that you don't just have sick people in your insurance.

John McDonough: That's very important because if you eliminate medical underwriting and pre-existing conditions and you have what we call guaranteed issue and you don't have a mandate, then sick and older people will come forward and take advantage of that opportunity, and younger healthier people, maybe even with insurance, will get rid of it and say I think I'll wait until I get sick before I buy coverage, and that contaminates the risk pool in a fatal way so that insurance becomes so expensive it becomes much more unaffordable for most people.

Norman Swan: At the moment I think it costs about $15,000 a year to insure a family in the United States.

John McDonough: It depends on the part of the country. In many parts of the country it is over $20,000, that's on average. It's like having your feet in the freezer and your head in the furnace.

Norman Swan: That's a lot of money.

John McDonough: Yes, and in Massachusetts it's the most expensive.

Norman Swan: How are you deemed to be able to afford it? That's a big lick of money for a family.

John McDonough: You can't, which is why most Americans don't. Most Americans get health insurance as part of their job. The employer pays a large portion of it, the federal tax treatment of it reduces the cost of it significantly. So there are all kinds of hidden and not so hidden subsidies. So basically at least 95% of the people who will get coverage out of this law will have some degree of subsidy to make it affordable.

Norman Swan: The United States of America has the most expensive health care system in the world per capita...

John McDonough: Number one. The second most expensive system pays about 65c in the dollar for every dollar we spend.

Norman Swan: But the rise in costs has stalled.

John McDonough: It has slowed, but we've seen this before. In the 1990s we saw a significant deceleration of the rate of healthcare inflation that lasted for about six years, and then in the last decade, the first decade of the 2000s we saw an explosion in costs again. Now we're seeing a moderation again.

Norman Swan: And do we know the causes?

John McDonough: In the United States, no matter what it is, we pay more for it than everybody. We pay our physicians much more, our nurses, we pay our hospitals more, we pay so much more for our prescription drugs, we pay more when you get a CT scan or an MRI. Whatever the service is, we pay half to a third more than consumers or governments in any other system, and that is because the United States since President Ronald Reagan in the '80s has really been affected by this ethic that the way to fix the problems of healthcare in America is through unbridled market competition. Conservatives will always say you don't have enough of a market or enough competition, and progressives will say we've got too much market and that's why, unlike Germany or Australia or Britain, we do such a poor job in controlling the overall rate of growth.

Norman Swan: So what's in the Affordable Care Act that's going to bring down costs or control costs?

John McDonough: The parts of the law that deal with that put in place new approaches to the organisation and management of care, so that the practitioners, the providers will change their behaviour because of different incentives. So one of the examples is the creation of these new entities called accountable care organisations. So hospitals, physician groups, home health agencies are banding together, and in banding together they are no longer being paid on fee-for-service or a piecework basis, they are getting global payments and taking responsibility for the total health of the people who are part of their systems of care to make sure, for example, that when you are discharged from the hospital you have appropriate care in place so that two or three weeks later you don't end up back in the hospital as a readmission, because when you do, under the new arrangement it comes out of their pocket and not out of the government's pocket.

Norman Swan: So they are carrying the risk.

John McDonough: They are taking on a significant degree of the risk as part of these ACOs. There are now more than 250 of them all across the country.

Norman Swan: So in other words it's a huge disincentive for them to do unnecessary scans, unnecessary pathology, unnecessary prescriptions.

John McDonough: Yes, and it's a huge incentive for them to pay attention to the kinds of things that have most bothered consumers in the United States; the lack of care coordination, the sense that I only care about you when I am in your eyesight and that you have no incentive to bother yourself one way or the other how healthy I am.

John McDonough: There is not the evidence yet because the systems are new. What we have in the Affordable Care Act are a bunch of delivery system reform experiments so that we will learn what works, learn what doesn't work, and then ingrain those changes as rapidly and thoroughly into the delivery system as we possibly can.

Norman Swan: One of the things that you've done here is kind of invent a system that Australia and Britain have had and many other countries have had for years, which is general practice, primary health care. You're calling it the medical home.

John McDonough: The medical home, yes, the patient centred medical home is the term right now.

Norman Swan: Tell me how it works.

John McDonough: Well, you have a primary care practice which, again, assumes some degree of risk and is accountable for not just you when you are in the clinic having a visit for whatever purpose but really has an incentive to pay attention to keeping you healthy, keeping you out of the hospital emergency room, making sure that you have the services that you need.

Norman Swan: So who judges the outcomes whether or not my diabetes is under control, whether or not I get a second heart attack?

John McDonough: This is one of the problems with our Serbo-Croatian medical empire in the United States is that we have so many different systems that are demanding the data to be able to evaluate how well you're doing that you have to at a certain point have some compassion for the medical providers who are being so compelled to report on so many different measures. There is one estimate right now that your average physician practice is being required to report on as many as 1,500 different quality measures, with different reporting requirements to different payers, because they're all dealing with many, many different payers. So that is one of the issues that we need to have, is to do a much better job rationalising these demands, these data demands.

Norman Swan: And then there is a lot of money going into research into comparing treatments.

John McDonough: Yes, but we are so far behind the UK, the NICE organisation, the National Institute on Clinical Effectiveness. Germany has had one of these entities going up now for about a decade. In the Affordable Care Act we set up a new national clinical comparative effectiveness institute that's called, PCORI, the Patient Centred Outcomes Research Institute, and the ACA explicitly prohibits it from doing anything to consider cost or cost effectiveness because that was not politically sustainable. People started saying that this was going to be the organisation that would bring into reality the death panels. So we had to eliminate any reference to its ability to consider cost when it compares clinical treatments, which I think is really kind of insane when you think of how much money we spend, but that's how it came out.

Norman Swan: One of the reasons why the market fails in healthcare is that consumers don't have the same level of knowledge as providers, and to make some of the decisions you're talking about you need a high level of inside knowledge on the part of the consumer. To what extent does the system give the power and knowledge to consumers?

John McDonough: Very poorly. We had a medical student doing some research who pretended to be trying to buy for cash a hip replacement for her grandmother, and she called something like 150 hospitals and most of the hospitals couldn't give her an answer, and the variation in cost ranged from a low of $20,000 to a high of $175,000.

Norman Swan: So Obama has got four years to go. When he leaves power what's the American health care system going to look like?

John McDonough: We should see a radically changed delivery system in the United States that is in fact truly meaningfully much more accountable, and much more focused on the whole patient rather than just the part of the patient that a medical care provider is paying attention to. We should see a significant increase in the proportion of Americans who have health insurance, and it will not be perfect. At best it will be about 95%. We probably have some of the biggest challenges that exist in any advanced country.

Norman Swan: From the sound of it in four years time we'll still be giving thanks that we live in Australia.

John McDonough: You bet, always give thanks for living in Australia.

Norman Swan: Professor John McDonough is in the Department of Health Policy and Management at Harvard School of Public Health in Boston. I'm Norman Swan and you've been listening to the Health Report. I'll see you next time.

Guests

Professor John McDonough

Professor of the Practice of Public HealthDirector of the Center for Public Health LeadershipHarvard School of Public HealthBoston